How to repay a home loan faster

Most home loans are locked in for 30 years. That's a long time. And the longer you take to pay, the more interest you end up paying.

You've taken out a $600,000 home loan? Well, with a 6% interest rate, you end up paying more than 100% extra. Your $600,000 loan has just cost you $1.3million. Congratulations.

The best way to get around this (other than not subscribing to the Great Australian Dream of home ownership) is to pay your loan off as fast as possible.

Here are some ways you can do that.

Increase your repayments.

Your repayments will be based on your loan value and the interest rate you've signed up for. While you definitely can't pay less than that, you may be able to pay more.

By paying above your repayment amount you'll be chipping away purely at the principal loan amount.

When rates fell to record lows in 2020, many people continued to pay as though their rates hadn't dropped. This would have cut their home loan down by thousands.

You'll need to check your loan terms though because some loans don't allow you to pay more. That, or they have a cap on how much extra you can pay. This is usually the case for fixed rate loans.

Make additional payments.

If upping your repayments doesn't work for you, you can also make one-off payments. The most constructive way to do this is by making a regular extra payment each month, but hey, cozzy livs. A one-off payment any time you can manage will still help.

In case you're worried, making extra repayments also usually comes with the benefit that you can take that money back out. This is called a redraw.

Again, it's important to check your terms and conditions because some loans only allow you to make extra repayments up to a certain amount each year, if they allow them at all.

Want to see the impact of making extra repayments? We have a calculator for that.

Switch to repaying weekly or fortnightly, not monthly.

Something not enough people say when they give this advice: this only works if you're already on a monthly repayment and you choose to switch. If you set up a 30 year loan with weekly or fortnightly repayments, it will take you the same amount of time to pay off as a 30 year loan that you pay monthly. It. is. a. 30. year. loan. term.

But, if you break up your usual monthly repayments to a weekly or fortnightly plan, you'll end up paying more towards your home loan over a year. That's because of the number of months versus the number of weeks/fortnights. You actually end up paying a full month extra over the year compared to if you kept paying monthly.

Use our mortgage repayment calculator to compare the overall cost of the loan if you paid monthly versus weekly.

Use your mortgage offset account.

Let me break it down: If you've got a $500,000 home loan and you have $100,000 in your offset account, you're only paying interest on $400,000.

Your mortgage repayments stay the same, though. So more of your repayment amount goes to your actual loan.

If you manage to build up the full loan amount in your offset, you can choose to pay off your loan early (that's what you're here for, right?) or you could keep the loan open in case you need access to cash at a later date.

Get the right type of loan.

You won't get anywhere with paying off your mortgage if you don't have the right loan in the first place.

Interest only loans might seem like a great option for some borrowers, but you are not paying down your loan balance with this loan.

Compare fixed interest rates and variable interest rates carefully. Depending on the cash rate target movements, one may be higher than another.

When rates are dropping, variable rates mean your repayments will likely lessen and therefore you could be able to afford making higher repayments or extra repayments.

Reduce your loan term.

With a shorter loan term, you'll pay off your loan much faster but your repayments may increase.

Use our mortgage repayment calculator to work out if you can afford your new repayment amount.

Speak to your existing lender to see if they will allow you to shorten your loan term. Some lender policies don't allow it.

You may need to consider refinancing to decrease your loan term. But remember that if you refinance you will need to get your property revalued. If your property has dropped in value, you're more likely to be rejected by banks. They don't like lending more money than they think a property is worth.

Save money elsewhere.

The money you save can be put straight towards your home loan!

Refinance your mortgage to a lower interest rate loan.

Refinancing doesn't help with paying off your home loan faster *directly* but it does mean you're more likely to have lower repayments and could be in a better position to make extra repayments or higher repayments, which will go straight to paying off your loan principal.

Get your budget in order / Look at ways to cut back.

A classic. Spend less on everything else and put more into your home loan.

Another easier said than done situation. We know the cost of living crisis has people stretched thin, so by no means are we telling people to put themselves in an even more dire situation. But if you can be stricter with budgeting and really cut back on discretionary spending, paying more into your home loan will help you out in the long run.

Rent out a room.

Have a room that's not being used? Consider renting it out. It'll help with Australia's housing and rental crisis *and* with your home loan.

Check out other banks.

Don't forget to keep comparing other lenders and loans to make sure you're not paying more than you need to towards interest.

Frequently asked questions

• How to pay off your mortgage in 7 years

  To pay off your mortgage in 7 years you'll need to be prepared to pay much higher repayments. It's likely that a few one-off payments won't make much difference (unless they are really big one-off payments).

  A $600,000 home loan with an interest rate of 6% over 7 years is a whopping $8,766 a month.

• How to pay off your home loan in 5 years

  To pay off your home loan within 5 years you need... a lot of money. While that's in jest, it's not totally inaccurate. You will need to make much larger payments more immediately, but over the long run you will obviously be better off.

  A $600,000 home loan on a 6% salary over 5 years is $11,600 each month. But you will only pay $95,981 in interest over the loan term - compared to the $695,030 you'd pay in a 30 year loan term.

Written by

Rebecca Pike

Senior writer

Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio

Rebecca's expertise

Rebecca has written 197 Finder guides across topics including:

• Home loans
• Cost of living
• Budgeting